Some unscrupulous people try to cheat when it comes to bankruptcy. They think they are going to try to be clever and manipulate the system. If you are caught attempting these types of tactics, your bankruptcy petition may be dismissed, and you could also face criminal charges. This could result in fines of up to $500,000 and five years in prison.
In this article, we will take a look at what not to do after filing for bankruptcy, or immediately before. Living in Texas the bankruptcy extensions are very generous and there is no need to try to cheat the system.
Lying About Your Wealth
The Chapter 7 bankruptcy filing requires you to disclose all of your assets. You must also list all of your income. This allows the trustee to calculate your ability to repay your debts. This is part of the “means test”. Trying to manipulate the test is not a good idea, since at some point the trustee is going to have access to all your financial records, and they are experts at reading this information. You are going to get caught and this will result in penalties and the dismissal of your bankruptcy petition which will leave you in a very bad situation.
Failure To Obtain Legal Advice
Bankruptcy law is not easy to understand and trying to avoid the cost of an attorney is often counterproductive and will cost you much more than the savings in legal fees. I understand that at the time bankruptcy is being considered it may not be the best time to pay legal fees. The most important thing when filing for bankruptcy is to get the best possible result, and an attorney can make sure that you are able to get the best possible deal. I found some figures from 2017 and only 5% of those representing themselves in bankruptcy succeed. The first thing an attorney can do is advise you on the best form of bankruptcy to file, Chapter 7, or Chapter 13, as this will have a big impact on what you stand to lose.
Giving Away Assets
Insolvency administrators are not stupid. If you try to hide your assets by giving them away to your relatives to be returned to you later, you will be caught. This is a common trick tried by people who are worried about losing their car. Giving away your car just before filing for bankruptcy so they won’t sell it is a sure way to lose the car and lose it unnecessarily. In Texas, there is a car exemption that allows 100% of the value of the car, which allows each driver to keep a car if they wish.
There are exemptions for most other types of property and in Chapter 7 bankruptcy, you are unlikely to lose much anyway. So why risk prosecution when you don’t have to?
Spending Remaining Credit Card Balances
The credit card companies, being an unsecured debt, will probably recover very little, if anything, of what you owe them. They have computerized records of their transactions. If they see a lot of unusual purchases immediately before they are notified of your bankruptcy, they will know what you were doing. This will cause them to contest your request to eliminate your debts with them. Instead, they will object and you will have to pay back what you have spent. In most cases, purchases made within 89 days of filing bankruptcy will not be included in the bankruptcy debts, so you are only making things worse for yourself.
Generally, you are not going to wake up one morning and realize that you are in debt and have to file for bankruptcy. Debt accumulates over time. During that period when bankruptcy is an increasingly likely option, it is totally irresponsible. Taking advantage of the value of the home during this period is not appropriate.
Attend Credit Counseling Course
Before filing for bankruptcy, you should take a credit counseling course. If you fail to do so, your request will not be accepted. After you have submitted the application, you will have to take another course, which is geared to your situation after the debts are discharged. If you do not attend this second course, your debts will not be cancelled, so do not avoid this course.
Possibility Of Losing The House
In Chapter 7 bankruptcy, creditors can continue to foreclose on property after you file for bankruptcy if you do not reach an agreement with the creditor to continue making monthly payments on your loans. In Chapter 13 bankruptcy, you will continue to make payments through the Chapter 13 repayment plan.
You May Not Be Able To Obtain An Auto Loan Immediately After Bankruptcy
Getting a car loan will probably be very difficult after you are discharged from bankruptcy. This will continue to be the case for a considerable period of time. Your immediate task should be to try to rebuild your credit after bankruptcy. The best ways to do this are:
Be current on all bills, don’t miss payments
- Get a new credit card. Special cards are available for the creation of credits. Do not miss or default on payments.
- Try not to borrow more than you can pay back.
You Will Not Be Able To Obtain A Mortgage Immediately After Bankruptcy
Likewise, it is almost certain that you will not be able to obtain a new mortgage immediately after the bankruptcy discharge. This is probably the most important example of what not to do after filing for bankruptcy. Many people, after going through bankruptcy, are very leery about getting credit again, but getting some kind of credit that you can easily pay off is the only way to build your credit back up. If you take out an installment loan or get a credit card for credit repair, make sure you pay everything on time and never default – don’t borrow more than you can easily pay back.